Interest rates have been reduced to 1% by the Bank of England to try and kick start the economic recovery, or at the very least to slow the negative growth that the UK economy is experiencing. Previous cuts haven’t had the desired effect and it doesn’t look like this reduction will be any different.

This is further bad news for savers especially those who are elderly and rely heavily on their savings to survive and also counter productive for Banks who are seeking more deposits.

Interest rates have been cut to 1.5% by the Bank of England, the lowest rates have been for 300 hundred years and an indication of the dire position of the UK economy.

Previous rate cuts haven’t been passed in full onto mortgage customers by Banks and they are unlikely to pass this cut on either. And neither have rate cuts encouraged Banks to lend confidently to individuals and businesses. The bigger concern with the rate cut is that savers who have been prudent will see their interest earnings reduce further which doesn’t encourage people to save and manage their finances sensibly. For this reason, David Cameron’s announcements on tax relief for savers a few days ago is very welcome.

The drastic 1.5% cut in interest rates is further evidence of the severity of the current economic slump with the Bank of England justifying its action by saying there had been a ‘marked deterioration in the outlook for economic activity at home and abroad.’ We also learnt today that house prices have fallen 2.2% in October according to the Halifax which now means that the average price of a UK home has reduced by £30 000 in value (13.7%) during the last 12 months. And sales of new cars fell in the UK at their fastest rate for 17 years with new car sales down 23%. The economic doom and gloom continues.